“We are one but we are many. I am, you are, we are Australian”.
This is a fitting backdrop to the Government’s SME Recovery Loan Scheme (SME Scheme), which aims to enhance lenders’ ability to provide cheaper credit for eligible small to medium enterprises (SMEs) impacted by COVID.
This was music to the ears of Australian banks like Australia and New Zealand Banking Group Ltd (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd. (ASX: NAB), Suncorp Group Ltd (ASX: SUN) and Westpac Banking Corp (ASX: WBC).
What is the SME Recovery Loan Scheme?
The Australian Government will cooperate with lenders to ensure that eligible SMEs or businesses will have adequate financial support once JobKeeper finishes.
The SME Scheme is only available to businesses that received JobKeeper payments between 4 January 2021 and 28 March 2021. In addition, only SMEs with up to $250 million turnover or otherwise known as gross income/revenue will be eligible.
Self-employed individuals and non-profit businesses will also qualify for this scheme.
Banks – yay or nay?
ANZ
ANZ Chief Executive Officer (CEO), Shayne Elliott provided full support of the SME Scheme and said this will ensure those businesses hardest hit will have access to the necessary capital to recover.
CBA
CEO of CBA, Matt Comyn emphasised the importance of such measures in providing low-cost finance to SMEs to invest in their businesses, grow jobs and take opportunities afforded by the recovery.
NAB
NAB offered its full support by advising it would support and help deliver the new phase of the Government’s SME Scheme. NAB was also delighted to see specific support provided for the aviation and tourism industries.
Suncorp
Suncorp echoed NAB’s satisfaction with the Government’s support for regions heavily impacted by decreased tourism.
Westpac
Westpac CEO, Peter King highlighted that even though a lot of the bank’s customers have recovered, there are still some sectors and geographies that continue to face headwinds. Peter King also made a great point about the SME Scheme providing businesses more time to recover.
My takeaway
The new SME Scheme will go a long way in helping businesses get back on their feet. More healthy businesses mean more interest income for the banks.
It’s encouraging to see that a lot of the banks are saying that a lot of customers are back on track. This is accentuated by the financial assistance from the SME Scheme.
Another underlying positive impact of this scheme is that it will try to prevent further job losses, mitigating potential financial hardship (i.e. loan repayments).
Overall, I think the scheme will have a significant positive influence on the banks.
If you are interested in ASX share ideas, I suggest getting a free Rask account and accessing our full stock reports. Click the link below to join for free and access our analyst reports.